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NEW YORK -- Best Buy (BBY) founder Richard Schulze may be considering a bid to take the electronics retailer private, according to a report by The Wall Street Journal.

The report, citing people familiar with Schulze's thinking, sent Best Buy shares higher Tuesday afternoon. The stock closed up 5%.

Richard Schulze, 71, founded the company in 1966 and is its largest shareholder by far with a 20% stake. The second-largest holder, the mutual fund manager Fidelity Management & Research Co., has 6.9%.

Schulze said earlier this month that he was considering options for his stake.

The WSJ report reiterated that Schulze could still sell his stake. But it said his "preference" is to take the company private, although the process of finding potential buyout partners is in the early stages.

Schulze initially announced in May that he would step down on June 21 at the company's annual meeting after an investigation found he knew that the then CEO Brian Dunn was having an inappropriate relationship with a female staffer. At the time he said he would remain as chairman until after the company's annual meeting on June 21 and as a director through the 2013 annual meeting.

However, he resigned abruptly June 7 instead.

"There is an urgent need for Best Buy to reinvigorate growth by reconnecting with today's customers and building pathways to the next generation of consumers," Schulze said in a statement on June 7. "Accordingly, I have shared my views with the Board and today informed them of my decision to resign as chairman and a director, effective immediately, in order to explore all available options for my ownership stake."

Best Buy and a spokesman for Schulze declined to comment.

Shares of Best Buy rose 86 cents, or 4.7%, to close at $19.37. The stock slipped 11 cents in after-hours trading. The stock is down about 21% since the beginning of the year.

Amazon.com (AMZN) reported a 34% spike in net sales during its first quarter on Thursday. Best Buy doesn't operate on the same fiscal calendar as the leading online retailer, but analysts feel that the company's top line will inch less than 3% higher when it reports next month.

It's not Best Buy's fault. A company with the overhead of manning physical stores can't afford to sell at the prices that nimbler Web-based retailers can offer. The wide availability of the Internet as a research tool also makes the hands-on perspective that local retailers provide less necessary, and in some cases even less desirable.

Some real-world chains are fighting back through exclusivity. Cheap-chic discount department store operator Target (TGT) has been a strong player in stocking up on items that are only available through Target.

Best Buy doesn't have that luxury.

Best Buy confirmed on Thursday that it's killing Best Buy Connect, the retailer's private-label mobile broadband service. It never took off, and the service reportedly had just 11,000 customers. Yes, the company has private labels for home theater and other consumer electronics, but it's not as if the merchandise is considered unique. This isn't Sears (SHLD) with brand equity for its Craftsman tools and Kenmore appliances.

Walk into a Best Buy and check out the racks of CDs, video games, books, and movies. All four of those media platforms are losing physical appeal as those industries go digital.

In Thursday night's quarterly report, Amazon revealed that nine of the 10 best-sellers were digital products. Best Buy may think it's scoring a sale when it sells a tablet or a smartphone, but it's really simply handing over the tools that will result in that shopper relying less on in-store purchases.

Another nugget in Amazon's report is that 130,000 of the books in its virtual marketplace are exclusive to the Kindle Store. Yes, a lot of that is vanity press stuff from authors who couldn't land real publishing deals, but 16 of Amazon's 100 best-selling e-books were exclusive to its store.

Apple (AAPL), on the other hand, is the poster child of the modern ecosystem. The success of iTunes has turned Apple into the country's largest music retailer. There are now hundreds of thousands of apps in the company's iconic App Store.

Best Buy has tried its hand at digital distribution of music and movies -- even to the point of buying Napster and CinemaNow -- but that hasn't panned out. Brick-and-mortar chains just don't have the high-tech appeal to launch cool digital ecosystems.

The worst part about movies, music, books, and games going digital isn't just the empty space that Best Buy will have to fill. The company has enough sharp retail vets to put the space to work with store remodeling plans that are currently in the works.

The worst part of the migration is that these are the items that forced shoppers to come back to Best Buy. You may only need a new washer once every 10 years, but there are always new DVDs hitting the market every Tuesday. New video games, CDs, and books are also always coming out. As more people replace physical media with digital -- and you do realize that Apple and Amazon are selling millions of tablets every passing quarter -- Best Buy will be a less frequent stop for even its most loyal customers.

Best Buy conceded in its most recent report that it will have to get serious about lowering prices in the future. Its aggressive expense-shaving efforts will be partly passed on to shoppers in the form of better pricing.

"We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices," Best Buy explained last month.

The problem is that it will probably never be able to cut its overhead to the point where it's truly competitive with Amazon and even cheaper e-tailers. This will force Best Buy into sacrificing margins on products, but hoping to make a profit by selling extended warranties, obsolescence insurance, and Geek Squad services. It's a plan that sounds fine on paper, but consumers are already tiring of the hard sell during the checkout process for services that they may never need. If Best Buy sees this as its future, it's underestimating what shoppers do when they're annoyed.

hhgregg (HGG) and Conn's (CONN) are some of the rare survivors in this field, and it's because they key in on heavy appliances, furniture, bedding, and even lawn care equipment that's harder to secure cheaper online, given the bulk of the items.

Best Buy naturally sells appliances, but that's just 5% of its business. If Best Buy wants to emphasize big-ticket items that are purchased very infrequently -- thereby taking on the smaller hhgregg and Conn's -- it would probably have to close all but a store or two in each of its major markets. There just isn't enough business for these products to justify Best Buy's existing store base and square footage.

In short, it's not going to happen.

Best Buy may be in the process of closing nearly 50 stores over the next few weeks, but there will be more of that in the future unless trends reverse and positive catalysts emerge.

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Waso the DJ

Half the time Best Buy employees don't know what they are doing or how to do their job near me. Also when most of their merchandise is online and almost all of it including the in store stuff says who it's actually shipping from and who you're actually buying it from like Amazon... there's no wonder why this chain is going bankrupt and it's their fault especially when the people who check their phones for prices are usually checking best buy's website so the corporation is at fault and yet on 20/20 they blamed the consumer. SCREW YOU! BEST BUY!

Unfortunately that seems to be the way the world works these days. No training, no focus on quality and no investment in employees. I think it is not limited to Best Buy; it seems to be everywhere. In the distant past a single wage earner could support a family on a retail paycheck. We all know that such a situation is long gone. The people who do the work for most retailers are just passing through because there is no reason to make a long term commitment. There is no way to live on the wages retailers pay.

Look at how little we value education. When I was in the ninth grade I took 9 different shop classes. Needless to say, I have a pretty good idea of how things like plumbing and electricity work. As well, it's also clear that I didn't go to school in the US; such an education would never be possible with the limited budgets we give to schools.

years ago we bought an extra warranty for a car stereo they installed.which when we hit the brake pedal the lights went out when the radio was on..great job...we brought the car back in and they said"ohh that installer did it"! typical .after 2 more times we brought it back the store manager said do not come back here anymore.I said the waranty says for as long we own the car it is warrantied..he ignored that..so i went to small claims court filed a claim the day before i get a call from main office of BB what will it take to settle out of court..I said I would love for the store maager to sit in court for a few hours ..but then decided to take the check they fed-exed the next day..I said does every warranty owner have to file a claim to get satisfaction? for 5 years I have not bought a thing in that store.bye bye BB

How would making Best Buy a private company solve the problems that it faces as the retail landscape changes?

I believe that the way in which retail stores operate has to change in a very fundamental way. Currently the brick and mortar stores are being used by customers as showrooms for the products they buy on the internet. Maybe manufacturers need to start paying a display, or demonstration fees. In effect, store will become more like continuous trade show rather than a place where you buy things. Maybe they should even promote internet shopping by customers by providing free WiFi or computers with internet connection to make purchases, with a small service charge for computer use or providing a delivery point.

It's a tough situation, but the first retailer to figure it out will survive and the rest may not.